Using the new add-in sleeves is completely optional. Some will decide to continue doing what they have been doing and not use them. Their current model portfolios will adjust to changes in market dynamics. If you decide not to use the add-in sleeves, simply continue using your current Shares-to-Trade worksheet; the mechanics of the sheet have not changed.
Use of the add-in sleeves is probably best suited to those who are already comfortable trading their Focused 15 investing portfolios.
I think we have a week or two before using the add-in sleeves will have an impact. This is a good time to review them and how they can be used.
My goal in creating the add-in sleeves is to make it easier to move gradually into the ETFs that have been part of the 2020 Recovery portfolios and the Emerald portfolios. The updated Shares-to-Trade worksheet allows you to continue with the model portfolio you are currently using, let’s call it your core model portfolio (or simply “core portfolio”), and at the same time allocate a portion of your account to an add-in sleeve.
On the weekly publications, I list two add-in sleeves. The first is the 2020 Recovery sleeve, which has ETFs linked to technology, healthcare, and communications stocks. The second is the Emerald sleeve, which includes ETFs for green energy and technology.
2020 Recovery Add-in Sleeve
This add-in sleeve focuses on NASDAQ, healthcare, and telecommunications stock ETFs. These ETFs are likely to be favored in the presence of social distancing and government efforts to stimulate economic recovery from the COVID pandemic. This sleeve includes ETFs linked to the tech-biased NASDAQ, the S&P Healthcare sector, and the S&P Communications sector. The ETFs will be dynamically weighted to avoid losses, although some losses will occur. The ETFs included may change over time.
We maintain two versions of the 2020 Recovery add-in sleeve, one for the Zircon, which does not use levered ETFs, and one for the Diamond and Sapphire publications, which use ETF “QLD” that magnifies the return of the NASDAQ 100 two times - essentially giving this ETF twice the market exposure of the NASDAQ 100 Index. Both 2020 Recovery versions have the following exposures to the ETFs (based on equivalent market exposures).
60% NASDAQ (ETF QQQ for the Zircon version and QLD for the Diamond/Sapphire version)
40% A mix of the ETFs VOX (telecommunications) and XLV (healthcare) ETFs
The 2020 Recovery add-in sleeve is designed to a) provide exposure to these sectors, b) avoid losses in the NASDAQ-linked ETFs (using historically tested algorithms), and c) rotate between VOX and XLV to favor the most resilient of these two sectors. This add-in is a good fit for those seeking to invest in sectors favored by the current economic and pandemic conditions.
Emerald Add-in Sleeve
The Emerald add-in sleeve focuses on clean energy and technology stock ETFs and a green bond ETF. This sleeve seeks to take advantage of what many believe is a mega-trend favoring investments in environmental sustainability.
We maintain two Emerald versions, one for the Zircon, which does not used levered ETFs, and one for the Diamond and Sapphire publications, which use ETF “QLD” that magnifies the return of the NASDAQ 100 two times - essentially giving this ETF twice the market exposure of the NASDAQ 100 Index. Both versions of the Emerald add-in sleeve have the following exposures to the ETFs (based on total market exposures).
30% NASDAQ ((ETF QQQ for the Zircon version and QLD for the Diamond/Sapphire version))
25% Clean Energy (PBD)
25% ARK Innovation (ARKK - an actively managed ETF focusing on disruptive technology)
20% Green Bonds (GRNB)
This Emerald add-in sleeve is designed to a) provide exposure to these sectors, and b) avoid losses in the NASDAQ-linked ETFs (using historically tested algorithms) and the Ark Innovation (ARKK) ETF (using a judgmental application of MRI-based disciplines). This add-in is a good fit for those with longer time horizons and/or a strong belief in the presence of the trend toward investments in environmental sustainability and who can tolerate temporary losses. THE EMERALD SLEEVES EMBODY MORE RISK THAN IMPLIED BY THE RETURN-TO-RISK CHARTS ON THE WEEKLY PUBLICATION. Some of these ETFs have short histories and are narrowly focused (PBD is focused on energy-related businesses). Also, this sleeve may be revised over time (including replacing ETFs), which will cause of restatement of historical performance figures. Links:
ARKK – Ark Innovation ETF. This is an active ETF, which means that the investment team at Ark buys companies that it believes will benefit from future trends. Website: https://ark-funds.com/arkk
GRNB - VanEck Vectors Green Bond ETF. Website: https://www.vaneck.com/etf/income/grnb/overview/
PBD – This ETF tracks the WilderHill New Energy Global Innovation Index. Website: https://www.invesco.com/us-rest/contentdetail?contentId=3dd2fd05f0e21410VgnVCM100000c2f1bf0aRCRD&dnsName=us
